Building on its track record of investing in technology to be ahead of the curve, and to accommodate shifts in consumer video consumption trends to support future growth, the group continued to transition strategically with an increased investment in Showmax, ahead of an exciting re-launch in the second half of this financial year.
"We remain focused on developing our leading entertainment platform that caters for consumer needs across sub-Saharan Africa, on leveraging our footprint to build a differentiated ecosystem and on developing additional revenue streams," says Calvo Mawela, Chief Executive Officer.
The overall excitement around three world cups, culminating in the Springboks emerging victorious as back-to-back Rugby World Cup champions, supported subscriber activity. A highlight of the interim period was the South African Premium customer base, which grew 5%, a positive trend for the first time in many years.
Although profitability came under pressure due to ongoing power interruptions, cost of living pressures and sharp depreciation in local currencies against the US dollar, the impact was mitigated by a change in focus towards subscriber retention, an improved customer mix, as well as ongoing pricing and cost saving disciplines to protect the resilience of the business. As a result, the group maintained a positive trading profit margin of 3% in the Rest of Africa (a
Salient points for the 1H FY24 period included:
Group revenue:
The group continued to deliver compelling local content and enable its audiences to access internationally renowned entertainment shows. Playing a vital role in supporting and developing the continent's wider video entertainment industry, it has increased its spending on local content by 16% YoY, taking its local content library to almost 80,000 hours. Going forward, the group plans to enhance the monetisation of each hour of content produced by leveraging both its linear and streaming platforms.
Several new titles were launched to maintain strong momentum in leading local language programming. In addition to the successful debut of Shaka iLembe on Mzansi Magic; Gqeberha: The Empire replaced The Queen in its time slot; and Umkhoka: The Curse continued to grow in viewership and social media engagement during the period. M-Net launched the higher-end series 1802: Love Defies Time on 1Magic. kykNET introduced a new medical procedural drama, Hartklop, and a new cooking reality show, Kokkedoor: Vuur & Vlam, both of which commanded strong audience share. Big Brother Naija entered its eighth season, delivering record advertising revenues in local currency.
Following on from the success of the FIFA World Cup in FY23, SuperSport yet again demonstrated its ability to deliver an exceptional sport offering, successfully broadcasting three
As part of its broader "Here for Her" campaign, SuperSport provided a world-first all-female broadcasting crew to produce the Netball World Cup in
Beyond
Operational performance review
The challenging consumer environment persisted into 1H FY24. Loadshedding remained the most immediate challenge in terms of subscriber activity, with the number of active days per subscriber declining by 5% due to a significant increase in both frequency and intensity of loadshedding, especially in Q1 of the reporting period. Premium and Compact bases showed improved stability compared to the latter part of FY23.
The group reported a 5% decline in 90-day active customers to 8.6m (3% of which can be attributed to the decision to end the short-term campaigns implemented in the prior year to support customers during loadshedding), with active customers amounting to 7.8m. More stable trends in the mid- and upper segments of the customer base, along with inflation-linked average price increases of around 4%, helped limit the decline in monthly average revenue per user (ARPU) to 2%.
Various initiatives were implemented to protect the economics of the segment and to help offset macro and consumer challenges weighing on the performance of the business into the second half, a period which is typically affected by the seasonally higher cost of the football content rights and festive season promotional activity. Key amongst these was the reduction in decoder subsidies through increased device pricing in our linear business and the relaunch of DStv Stream, which has more than tripled its subscribers since
Revenues declined by 3% to
Rest of
After adding 1.4m new subscribers in FY23, subscriber growth in the Rest of Africa was more subdued in 1H FY24. This was due to the impact of inflationary pressures in key markets like
Revenue of
Weaker currencies remained a significant impediment to improvements in profitability, with average first half exchanges falling sharply against the USD. The sharp fall of the naira resulted in a large proportion of the previously recognised losses incurred on cash remittances now being recorded in trading profit. The net effect of these forex movements was a negative
Showmax
The Showmax partnership with Comcast (owners of NBCUniversal, Sky and Peacock) was concluded on
Showmax (now reported separately from the South African segment) saw its active subscriber base increase by 13% YoY, resulting in revenues growing 46% (+45% organic) to
Technology segment
Trading profit was affected by once-off restructuring activities in the core media security business as the business adapts to the changing media landscape, and increased by a modest 1% on an organic basis.
On a standalone basis,
KingMakers
KingMakers continued to deliver strong underlying operating momentum despite the impact of the weaker naira and challenging macro environment in
The core development focus for KingMakers was preparations for the soft launch of SuperSportBet in
KingMakers is focused on optimising the profitability of its agency business and growing its higher-margin online business that, together with the opportunity presented by the new South African business, will support its path to sustainable profitability.
The product and market expansion plans are fully funded with KingMakers having
Moment (Fintech)
The Moment joint venture made significant progress in integrating with group core payments infrastructure and remains on track to commercialise its local services in 2H FY24.
In addition, Moment prioritised payment service integrations for the Showmax business to support the streaming platform's launch in 2H FY24. The platform is set to deliver returns equal to the initial investment within a 20-month timeframe and will become increasingly important to the success of the group's ecosystem in future, providing simplicity to customer payment options, more integrated rewards platforms and B2B revenue opportunities.
Future Prospects
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The focus remains on driving further efficiencies in operating expenditure, as well as working capital and capex decisions, to ensure consistent and optimal returns on all capital deployed. At the same time, the group continues to seek ways to support or improve the economics of the business through pricing decisions, optimising customer mix and content monetisation, as well as calibrating decoder subsidies according to the macro-economic backdrop.
The group is also carefully investing behind nascent or future business lines, taking into account the strategic importance and prospects of success.
"The second half of FY24 will be an important period in our journey to expand our ecosystem beyond Africa's leading linear pay-TV operator into a broader ecosystem of interactive entertainment and consumer services to enable us to double our customer base to 50 million over the next five years. The relaunch of Showmax, combined with KingMakers' entry into the South African market with SuperSportBet, and Moment's platform launch are all important milestones as we accelerate growth and drive additional scale, creating a 'world of more' for customers and additional value for shareholders." Mawela concluded.
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